Author: @Pathfinder0x18D
⚠️Disclaimer: Not Financial Advice || Do Your Own Research!⚠️
DeFi is growing at an unprecedented rate, creating thousands of new projects, assets, and communities. The average existing DeFi user chases yield, largely in units of the native token, while taking on various risks. To perform this optimally requires an infinite supply of time and energy in identifying new farms, constructing a portfolio, and actively managing risks (such as correlation, price, and leverage).
Digital Asset Management isn't easy!
Friktion introduces an Automated Portfolio Manager (APM) into the DeFi ecosystem, offering both active and passive strategies through our native investment products, Volts. The APM provides a set of profit opportunities for users in the Friktion network with or without an existing portfolio, finding ways to maximize return while providing volatility protection and yields in turbulent markets.
Why Solana? DeFi on Solana has a distinct advantage of high throughput/transactions per second (tps) at low transaction costs, fast settlement times, which makes it a natural fit for a variety of financial primitives comprising a majority of notional trading volume in conventional markets.
Friktion currently has one (1) product that is live on app.friktion.fi/income and three more being programmatically built out
Volt#01: [Covered Call Options] Income Generation
(in development) Volt#02:
[Cash Secured Puts] Sustainable Stables
(in development) Volt#03:
[Volatility] Volatility Yield
(in development) Volt#04:
[Imperament Loss Hedge] Hedge IL
What Are VOLTS?
Volts are the building blocks of Friktion!
Quantitative yield strategies to generate returns across market environments. Volts allow anyone to invest in and trade products that are built with principal protection, yield generation, and volatility in mind.
How's it work under the hood?
Volts operate in cycles, called Epochs, (1 or 2 weeks depending on the asset/strategy).
Epochs begin and end on Fridays (12 AM UTC). At the start of an Epoch, the strategy is deployed. This happens through a competitive, blind Dutch auction designed by Channel RFQ where market makers bid on-chain for the options being traded in the Volt.
The way Friktion handles deposits and withdrawals is complex. The complexity exists for a reason though, because Friktion is carefully engineered to fit certain constraints:
SAFETY: The pending deposit and withdrawal are necessary because entering/exiting mid epoch could be abused to unfairly dilute yields of other participants or even worse drain balances of other participants. The design of Friktion prioritizes safety by having these pending states.
COMPOSABILITY: Friktion share tokens (fcSOL, fcBTC, fpBTC, etc) are similar to LP tokens, which represent a pro-rata ownership of the pool. This token is a "rebasing token", meaning it will change in value relative to the deposit token. So if you have 10 fcSOL today, you will still have 10 fcSOL a year later, but that 10 fcSOL might be worth 13 SOL.
This diagram below illustrates the flow of capital in a Volt across time (Epochs):
DEPOSITS
Users can deposit assets anytime
into desired strategies which will be deployed when the upcoming Epoch begins (Friday AM UTC/GMT).
Deposits made during an active Epoch are
Pending Deposits
until the next Epoch begins, at which time they are deployed into the strategy!Pending Deposits
--> When you create aPending Deposit
no share tokens are minted. The record of the deposit exists as a number in the Friktion smart contract and is not visible in wallets.Instant Deposits
--> Only possible when the 1st Epoch for a new asset has not started (read: you are early). This will instantly mint the share tokens.
WITHDRAW
Mint share token: After
Pending Deposits
turns into a non-pending deposit, you can mint Friktion share tokens corresponding to how much you are entitled. ** Minting is optional **Once you are entitled to a certain number of share tokens, the amount you will receive will not change (but you will still earn yield because share tokens grow relative to the deposit token).
These share tokens exist in your wallet and you can see them in your wallet. We are adding labels to these in wallets soon.
Share token --> Pending withdraw: When initiating
Pending Withdraw
, the app will take your share tokens. This step will first automatically mint the share tokens, before giving them back to the Friktion protocol.The record of your pending withdrawal exists as a number in the Friktion smart contract storage (it will not be visible in your wallet).
You can check on the status and amount only in the Friktion app.
Claim: Pending withdraw >> Deposit token: After the
Pending Withdraw
is processed (at the end of every epoch), thePending Withdraw
can beCLAIMED
.